BSE woos investors to ramp up F&O volumes

In a bid to ramp up activity in its once-floundering derivatives segment, the Bombay Stock Exchange (BSE) is going all out to woo potential investors "" at home and overseas.

BSE officials have been going around the globe, making presentations to foreign institutional investors (FIIs). At home, a business development team has met with most major domestic institutions and mutual funds. To target the small retail investor, the BSE had recently organised seminars-cum-contact sessions in 12 Indian cities.

A team of BSE officials recently went to Hong Kong to make presentations before investors there. The response has been good, exchange officials told Business Standard, and they have chalked out a busy itinerary to other Asian money centres as well. They have also organised roadshows, seminars and investor awareness programmes. The target is to capture Rs 500 crore of turnover every day by this year end, they added.

In fact, domestic entities have already committed to the exchange that they will participate on the BSE derivatives segment once the turnover crosses the Rs 300 crore per day mark on a consistent basis, officials said. More importantly, foreign portfolio investors have told the BSE that they would surely patronise the exchange if it comes out with longer duration option products.

They are keen on the BSE starting 6, 9, and 12-month options like those available in some European markets, BSE officials said. Currently, the BSE has three sets of options, extending to three months maturity, besides the weekly options.

The BSE business development team is going all out to promote the newly launched weekly options and the USP is short-term perspective and smaller premiums. The BSE officials are also leveraging the fact that the Sensex is a well known 'brand' worldwide, reflecting market movements and sentiment.

Also, it is the only broad-based index in India that is 'free float market capitalisation weighted'.The same pitch has been used with domestic entities.

Sources said the fact that having two active exchanges will work to their advantage in the long run has also been subtly put across to market entities, if not directly. Volumes on the BSE derivatives segment had fallen to zero before the exchange hit upon the weekly options.

Besides, their effort to reach out to the investor seem to be paying off, say exchange officials. But exchange sources added that many large domestic institutions have promised to participate but no one has made the first move.

"It looks like each one is waiting for the other to trade first." A top BSE official said, "We have introduced the weekly options, which have met with a good amount of success. With the introduction of weekly options, a product will always be available for participants with a short-term view."

The derivatives volumes are moving up gradually "" hitting a peak of Rs 257 crore per day, constituting volumes mainly from Sensex futures and an approximate volume of Rs 35-40 crore from weekly options on the Sensex."

The BSE official added, "Now that the market players are aware of the wonderful opportunities in weekly options, we are targeting the individual investor for whom the product is actually structured. For very small premiums an investor can take a short-term view of the market and make substantial gains. Losses, if any, can be curtailed by exiting from the option if market moves in an adverse direction. To this end, we have recently had investor meets in various regions."